Posts Tagged ‘amtote’

By Ray Paulick
Will a bet-processing tote division be the newest sibling in the Jockey Club’s family of companies? That’s the word I’m hearing from a variety of sources within the industry who say the not-for-profit breed registry is itching to get into the tote business with a new, for-profit subsidiary along the lines of Equibase, the horse industry’s official database for racing information that the Jockey Club owns in partnership with the Thoroughbred Racing Associations of North America.

Alan Marzelli, the Jockey Club’s president and chief operating officer, declined to comment when asked by the Paulick Report about the company’s possible entry into the tote business.

It makes perfect sense for the Jockey Club to take over yet another segment of the Thoroughbred industry, though it would be a move that is not universally supported. Would its entry into the tote business be a case of merely doing what’s right for the industry, or an opportunity for empire building by the Jockey Club, which already has six for-profit divisions? Those divisions are Jockey Club Information Systems (a data provider to industry publications, sale companies, and others); equineline.com (which sells breeding and racing statistical reports); Equibase (which sells past performance information to Daily Racing Form and for programs sold at racetracks and provides some free information to the public); TrackMaster (which sells customized handicapping information); InCompass (which bills itself as a technology solutions company for the industry and is involved in such areas as racetrack paymaster accounts); and TJC Technology Services (which provides technological infrastructure and support for the various Jockey Club companies).

These Jockey Club companies are all inter-related. For example, Jockey Club Information Services and equineline.com require pedigree information, which is provided by the Jockey Club’s registration department. Racing results from Equibase are fed into TJCIS, equineline, and Trackmaster products for consumers and into software applications in racetracks. A bet processing or tote company and an account wagering division currently are missing pieces in a Jockey Club strategy to cover as many of the industry’s bases as possible. The various companies must pay for the data, but the money essentially shifts from one pocket to another.

Let’s look a little more closely at the state of the tote industry. The three existing companies – Scientific Games Racing (Autotote), AmTote and United Tote – each has roughly one-third of the North American market. All have been struggling for years, in part because racetracks have played one company against another in contract negotiations and have marginalized their business. As a result, they have not made the kind of profits that lead to substantial investment in research and development, and the end product has been one that is technologically inferior and suspect in its ability to maintain absolute integrity in wagering pools.

All three companies are for sale. AmTote, which Magna Entertainment acquired for $17.4 million in a two-phased purchase agreement in 2003 and 2006, is part of that company’s bankruptcy filing. Last month, Scientific Games, a company that makes most of its money in lotteries, hired a financial consultant to look into selling its pari-mutuel division, formerly known as Autotote. Youbet.com, an account wagering company that has not been profitable, paid $49 million for United Tote in 2005 (at least two times higher than the appraised value of some industry insiders). One year ago, Youbet.com officials said they were hoping to find a buyer for United Tote.

At this stage, a purchase by the Jockey Club of United Tote seems the most likely, and sources say a deal could be announced in the coming weeks. The company has contracts with the New York Racing Association, which walks in lockstep with the Jockey Club. United Tote also serves Keeneland, whose president, Nick Nicholson, was instrumental in the development of the “family of companies” strategy when he worked as executive director of the Jockey Club. United Tote has contracts with the other Kentucky racetracks, including Churchill Downs, which employs AmTote at the other racetracks it owns.

All of the uncertainty involving the three leading tote companies comes at a time when the integrity of the Thoroughbred industry’s pari-mutuel wagering systems is being questioned by racing commissions, track operators, and, perhaps most importantly, horseplayers. Autotote, in particular, has been at the center of several controversies, including the 2002 Breeders’ Cup pick six scandal when three of the company’s employees had the only winning ticket and were in line for a $3-million payout. It was discovered they hacked into the system and processed their pick six tickets after the first four races had been run.

Racing executives familiar with the tote business suggest that United Tote may have the best tote machines, while the back end or software infrastructure for AmTote is the most advanced. Scientific Games is viewed as the laggard of the three companies, from a technology standpoint.

SHADES OF EQUIBASE?
This all sounds a bit similar to when Equibase was created in 1990. The Daily Racing Form had been owned by Walter Annenberg’s Triangle Publications for well over a half-century when he sold it to Rupert Murdoch’s News America Corp. in 1988, ending what had been a very cozy relationship between the Form and the racing industry. Whether this upstart Aussie (whose publishing empire includes the New York Post, Fox and other major media outlets) upset Jockey Club pooh-bahs like chairman Ogden Mills (Dinny) Phipps or they were worried about price-gouging or additional changes in the Form’s ownership will probably never be known. But under the banner of the racing industry collecting and owning its own data (versus a private company like Daily Racing Form doing it), Equibase was established in the imposing shadow of the Jockey Club.

At the time, there were pronouncements that the industry needed to provide more information to fans. Alan Marzelli, then the chief financial officer of the Jockey Club, said the “promotion and betterment of racing is behind the decision” to start Equibase. David Haydon, a longtime Jockey Club employee and the first Equibase president, took it one step further, saying the new company would “address racing’s need for fan base expansion.” Jockey Club chairman Phipps himself said, “Everyone in the industry realizes we have to make a day at the races more enjoyable and less intimidating for the general public.”

Equibase has succeeded as a business. Now, instead of competing with the Daily Racing Form, which eventually closed its track and field data collection operations, the Form is its biggest customer, purchasing past performance information to provide in its daily newspaper and for its online products. Most racetrack programs now include past performances – at a fee to consumers.

But where exactly has Equibase succeeded in expanding the fan base or making the races less intimidating?

Other sports, from Major League Baseball to the National Football League, National Basketball Association, and the PGA Tour, provide extensive data at absolutely no cost to the fans. This information is used by fans to make watching the sports action that much more enjoyable, and allows them to be more informed, whether it’s for their own general knowledge or to participate in the fantasy leagues that have become so popular, especially with young people.

Racing, or more specifically Equibase, insists on charging its fans for some of the most basic data. Lifetime past performances of a single horse cost a consumer $8; lifetime stats on a jockey or trainer cost $7 on Equibase’s sister site, equineline.com. If you want career statistics for a baseball player, just go to Google and type “Barry Bonds stats” and you’ll have a plethora of choices for free.

If you want to look at a simple race chart that’s more than a few days old, Equibase charges you $1.50. You want the box score of an NBA game from last month? Go to NBA.com, and click on scores. They’ll provide you with more stats on the game than you could possibly ever want – at no charge.

“It is symptomatic of our industry being a step behind,” said one racing executive who has grown wary of Equibase’s profit-driven motive and thinks the company has strayed from its original mission. “It’s short-term thinking. If our objective in racing is for the horseplayers to win, we should do everything we can to help him, and increase the churn. That’s where the revenue for our business should come from, not from the statistics the horseplayer needs.”

Hank Zeitlen, the current president of Equibase, said fans can get deals for free past performances from some of the account-wagering companies (which, of course, have to pay Equibase to buy the data) and there is often past performances for “feature races of the week” that Equibase makes available at no charge.

 “If you look back to 1990 and see what information was available and how it was made available, we’ve accomplished a lot,” said Zeitlen, who added that it’s unfair to compare racing with other sports. “The economic models of other sports are different than ours,” he said. “Each of those leagues has revenue coming from television. We don’t have that. And Equibase is not a handle-driven business.”

Zeitlen overlooked the fact that the tracks in the TRA that own two-thirds of Equibase (the Jockey Club owns one-third) are handle driven businesses.

JOCKEY CLUB’S THIRST FOR PROFITS
Perhaps it’s this thirst for profits that makes more than a few people wary that the Jockey Club may be getting into the tote business. There are some in that industry who say the Jockey Club, despite its claims, is not a very savvy technology company, and that its entry into the business would not be a giant leap forward – particularly if they wind up with a monopoly. Others believe the Jockey Club should focus on its core business, registering foals, and let private enterprise take care of other segments of the industry.

It was 10 years ago that Tim Smith, then commissioner of the National Thoroughbred Racing Associations, tried to forge a deal between the North American racing industry and IBM Global Services, which promised to modernize the tote system. An IBM executive told the Jockey Club Round Table in 1999 that he had never seen an industry so far behind in technology. The IBM proposal was blown up by some tracks who didn’t see the need for change or improvements in the industry’s tote and simulcasting technology.

Ten years later, we’re even farther behind. It’s clear something must be done to guarantee that the process of handling wagers is improved. If not, the industry will continue to lose the confidence of horseplayers, many of whom are convinced that past-posting of bets and tampering within wagering pools is all too common.

Is the industry ready for the Jockey Club’s family of for-profit companies to grow? Do we really have a choice?

Copyright © 2009, The Paulick Report

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By Ray Paulick
The old cliché about necessity being the mother of invention helps tell the story of the significant turnaround that Oaklawn Park in Hot Springs, Ark., has engineered in the last decade.

In the mid-1990s, when neighboring states approved casino wagering, Oaklawn lost 40% of its handle. Charles Cella, whose family owns the track, put $5 million of his personal funds toward purses to keep racing viable. There was talk of Oaklawn going out of business.

When track officials were rebuffed in efforts to bring slot machines or casino wagering to Oaklawn, two of the track’s top executives, general manager Eric Jackson  (pictured, left) and wagering director Bobby Geiger, got together with Ted Mudge, then president of tote provider AmTote, to brainstorm about possible gaming alternatives to slot machines.

“We worked for 36 hours straight,” Jackson recalled in an interview with the Paulick Report at Oaklawn Park last weekend. “What we came up with was Instant Racing, which we think is a perfect gaming product for racetracks.”

The first 12 Instant Racing machines were installed at Oaklawn Park in 2000. Using previously run races, the Instant Racing machines employed a pari-mutuel model for wagering (the blended takeout is about 9%, with 15% of the revenue going to purses). The games were a hit with racetrack visitors, and more machines were added. The success of Instant Racing helped convince the Arkansas legislature to approve other electronic games of skill in 2005, and a local referendum subsequently passed, permitting such games as video poker and blackjack. Today, Oaklawn Park’s gaming room has a total of 500 machines (350 of them Instant Racing), and a 90,000 square-foot-addition on the south end of the grandstand will allow the track to double the capacity of machines. Phase one, scheduled for May of this year, will bring in 150 more machines. Phase two is scheduled for the end of the year. 

The increase in the number of machines will permit Oaklawn, which already offers its highest purses ever, to have an even higher purse structure in place for the 2010 racing season.

Revenue from Instant Racing machines contribute toward one-third of Oaklawn Park’s daily overnight purses. A constantly updated electronic sign outside of the gaming room keeps a tally on how much the electronic gaming has contributed to purses: the number currently exceeds $17.6 million. Jackson said Oaklawn Park also has paid $600,000 in royalties to other tracks whose races were used for Instant Racing. There have been 12 generations of Instant Racing machines since 2000. On a slow day during the non-racing season, Jackson said, about 2,000 people will visit Oaklawn Park’s gaming room to play Instant Racing and the other electronic games. He called it a “very predictable business.”

“We caught lightning in a bottle,” said Jackson, who’s worked at Oaklawn park for 30 years, the last 21 as general manager. “We are mystified as to why other tracks haven’t tried it.”

Before casino competition in neighboring states, before Remington Park was built in Oklahoma, and before pari-mutuel wagering was approved in Texas, Oaklawn was the undisputed king of Thoroughbred racing in the region, attracting fans from Texas, Louisiana, Oklahoma and other neighboring states. The increased competition from tracks in Oklahoma and Texas made the Oaklawn team work harder and smarter, but the casino competition nearly put them out of business. Instant Racing may have saved Oaklawn Park, but the track also offers superior customer service, presents a high-quality racing product, and a good overall entertainment experience.

Jackson is proud of the management team assembled around him, which he calls “seasoned, tested and excellent. They’ve been together a long time and really are very good at what they do.”

Bobby Geiger, the wagering director, has been at Oaklawn 25 years, as has food and beverage director Jimmy Johnston, Nancy Muncrief in accounting, and Kim Baron in the track’s marketing department. Racing secretary Pat Pope has been part of Oaklawn’s team for 20 years, and track announcer and media relations director Terry Wallace has been there 35 years. Larry Snyder, the longtime leading rider at Oaklawn, has been in the stewards’ stand for 15 years.

“When you walk through our various departments, it is not unusual to find folks who have been here 20, 30 or even 40 years,” Jackson. “A lot of loyalty – employees to Oaklawn and Oaklawn to employees.”

Jackson is also proud of the fact that Oaklawn Park has incorporated gaming into its wagering menu without changing the focus away from horse racing.

“More than a dozen tracks have gotten gaming,” Jackson said, “and everyone else has brought in casino folks to run the business. The first thing that happens then is racing becomes a step-child. That’s not going to happen at Oaklawn Park. We’re going to stay true to our mission.”

Copyright © 2009, The Paulick Report

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By Ray Paulick

Under normal circumstances, handle on the 2008 Breeders’ Cup World Championships would blow past all previous betting records. But the economic crisis gripping the United States and many other countries is anything but normal.

This year’s World Championships take place over two days at Santa Anita Park Oct. 24-25 and includes 14 Breeders’ Cup races, up from the 11 held at Monmouth Park in 2007 when the event was first expanded to two days.  Last year’s two-day handle was a Breeders’ Cup record $147 million ($31.5 million on the Friday card and $115.7 million on Saturday), but the total was below expectations by at least 10% because of the extremely wet weather conditions. The previous all-sources wagering record was set in 2006 when $140.3 million was wagered on eight Breeders’ Cup races on a single day at Churchill Downs.

Ken Kirchner, the president of FalKirk International and the longtime wagering consultant to the Breeders’ Cup, wouldn’t make any predictions about this year’s handle. “It’s hard to say where the economy is going to be in 10 days,” Kirchner told the Paulick Report. “Everybody has been down between 10% and 20% in wagering all summer and fall. Things can change quickly, but certainly the trend isn’t good.”

Kirchner hopes some fans have been stockpiling a bankroll for the big event. “It’s not a positive situation,” he said, “but we’re going to have very strong and full fields and some people may just be waiting for this as opposed to betting the run-of-the-mill races.”

Holding the Breeders’ Cup’s traditional dirt races on a synthetic surface doesn’t bother Kirchner. “The new (Pro-Ride) track seems to be playing fair,” he said. “If the horses show up, the bettors will follow.

Kirchner did say scheduling the Breeders’ Cup on the last weekend of the month is a disadvantage because of consumer spending habits. “Having it at the beginning of the month (when Social Security and other fixed income checks arrive) makes it 3% to 5% stronger,” he said.

The Breeders’ Cup had the first $100-million wagering day in North American racing history Nov. 6, 1999, at Gulfstream Park. That was the year the Filly & Mare Turf was added, making it an eight-race championship.

By comparison, Kentucky Derby day betting topped $100 million for the first time in 2000, and it’s grown significantly since. Churchill Downs now holds the North American record of $175 million established on the 2006 Kentucky Derby program. Add wagering from Friday’s Kentucky Oaks program ($33 million in 2006), and the total tops $208 million.

It’s clear the Breeders’ Cup braintrust is trying to emulate the success of the Friday Oaks/Saturday Derby format at Churchill Downs by bundling all of the filly and mare races on this year’s Friday program (and by requiring fans to purchase seats for both days as Churchill Downs has done with the Oaks and Derby). The Breeders’ Cup doesn’t have the cachet of the Kentucky Derby (or the Oaks for that matter), though that doesn’t mean the new format will not work.

With the additional Breeders’ Cup races, better weather and a more traditional big race venue (Santa Anita vs. Monmouth Park), handle will increase this year. My prediction is for $175 million in wagers over the two championship days. Without all the economic uncertainty, $200 million would seem realistic.

SPEAKING OF BETTING, REMEMBER THAT JUNE 28 RACE AT PHILADELPHIA PARK when wagers were allowed at some Florida simulcast sites after the race had been run? The Thoroughbred Racing Protective Bureau issued a report and sent it to the tracks involved – Philadelphia Park and Tampa Bay Downs – but according to Peter Berube, Tampa Bay’s vice president and general manager, he still doesn’t understand exactly how the Philly Park past-post bets occurred.

“I have the report,” Berube told the Paulick Report last week. “It’s highly technical but draws no conclusions and places no blame on anybody. Apparently it was a sequence of events that took place between the tote companies.”

Scientific Games (formerly Autotote), which handles wagers for Philadelphia Park, was experiencing technical problems with its system that day at races from Philly and Delaware Park. Tampa Bay Downs and 11 other North Florida wagering sites (dog tracks and jai-alai frontons) use AmTote. A communications breakdown between the systems failed to send a stop-bet signal to AmTote.

Joe Wilson, chief operating officer of Philadelphia Park, did not return phone calls seeking a comment.

According to Berube, the past-post wagering was limited to his track, with most of the past-post bets placed by one customer, who is known as a big bettor at Tampa Bay. “What’s in the report would lead me to believe that there was no abnormal spike in bets overall,” Berube said. “We were the 14^th ranked site in terms of total bets (on the fourth race, the race in question), but first in cashes. We were the only site that had a negative settlement (with more winnings that money wagered).”

Berube said he interviewed the horseplayer who allegedly made the past-post wagers but allowed him to collect on his winning bets. “We brought people in and spoke with them but after Philadelphia Park priced the race I couldn’t tell them to give us the money back.

“I’ve been here 15 years and have never experienced anything like this before,” said Berube, whose father, Paul Berube, is the former head of the TRPB.

Copyright © 2008, The Paulick Report

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By Ray Paulick

Copyright ©2008, The Paulick Report

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